Federal Court denies Balboa Insurance Company's motion to dismiss for failure to state a claim.
In a ground-breaking decision, a landowner's/homeowner's claims under a force-placed insurance policy will be allowed to proceed in Paulino v. Balboa Insurance Co., 2013 WL 4845919 (M.D. Fla. September 10, 2013).
The plaintiff homeowner, Ms. Sagrada Paulino, alleged two claims: Breach of contract and declaratory judgment. The claims are "against Defendant Balboa Insurance Company related to a lender-placed policy of insurance. Count I of the complaint alleges a breach of contract claim for Balboa's failure to pay damages related to loss and damage to the subject property arising from sinkhole activity, a covered loss." Paulino v. Balboa Insurance Co., 2013 WL 4845919 *1 (M.D. Fla. September 10, 2013).
Until now, a homeowner has had no recognized legal rights under a force-placed, lender-placed policy of insurance. FPI is not substitute homeowner's insurance protecting the homeowner. The interests protected by FPI are the interests of the lender exclusively. The total premium for an FPI policy, however, is paid by the homeowner.
Balboa accordingly argued that Ms. Paulino "does not have third-party standing to assert her breach of contract claim because the subject policy was placed with the lender." Paulino v. Balboa Insurance Co., 2013 WL 4845919 *1 (M.D. Fla. September 10, 2013). The Federal Court in this case denied Balboa's motion and ordered Balboa to file an answer within 14 days of the date of the Order, Paulino v. Balboa Insurance Co., 2013 WL 4845919 *2 (M.D. Fla. September 10, 2013), or by Tuesday, September 24, 2013.
The Court also denied Balboa's motion to dismiss Paulino's second alleged claim, her declaratory judgment claim. She based that claim on what the Court called "an actual controversy," contrary to Balboa's argument in favor of dismissal that there was no controversy and the declaratory claim was "subsumed by the breach of contract claim" according to Balboa. Paulino v. Balboa Insurance Co., 2013 WL 4845919 *1 (M.D. Fla. September 10, 2013). The "actual controversy" ripe for declaratory judgment is Paulino's alleged claim that Balboa should have "meaningfully consulted" with her "on the selection of the expert to perform subsidence testing and remediation recommendations." Paulino v. Balboa Insurance Co., 2013 WL 4845919 *1 (M.D. Fla. September 10, 2013).
The Court addressed this claim as raising a question for the Court to declare an answer, "is she bound by Balboa's expert to determine the extent of the damages? ... This issue is not subsumed by the breach of contract claim," the Court held, "because it must be separately determined before the extent of any breach can be determined. In other words, the extent of Balboa's obligation under the subject policy to meaningfully consult with Paulino in the selection of the expert is a separate issue from the issue of whether Balboa breached the subject policy by failing to pay damages." Paulino v. Balboa Insurance Co., 2013 WL 4845919 *1 (M.D. Fla. September 10, 2013).
The Paulino case bears close watching, I think. I will be monitoring it from here on out. Beyond September 24, 2013 when Balboa's answer is due to be filed, I have no doubt.
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